Thomas Crapper, you know him, he’s one of your best friends. He’s the the guy that made getting rid of dodgers popular. He’d like today’s fuel surcharges because, yep, they’re something else that need flushing. For good.
Fuel surcharges are a big problem for me. I’m sure they are for you as well. And, with sites like GasBuddy.com suggesting we could see north of $5/gal for gas here in the US by summer, I’m fairly certain we’ll see them bigger than ever.
What’s my beef? The problem with fuel surcharges is that it’s a poor attempt by companies to try removing one of the 4P’s from consideration. They’re trying to fool everyone.
What are Marketing’s 4Ps?
This is akin to real estate’s location, location, location.
Any company taking a product or service to market needs to consider each of these carefully. How the 4Ps are packaged ‘collectively’ has a very direct bearing on their offering’s success.
When customers (like you or me or our businesses) consider a product, they are looking at the essence of the whole. The final decision comes down to perceived value by the buyer. Emotion can cloud things, but there still has to be sufficient value.
Volt’s an Example
That’s one of the key reasons the Chevy Volt is having a hard time competing. One of the Top Competitors to the Chevy Volt is GM’s own Chevy Cruze. Why? Because the hybrid ‘surcharge’ doesn’t offer enough value.
Both cars share the same platform. But one costs $16,800 to get 42 highway. The other costs $39,995 and gets 60 mpg. That’s a stiff surcharge for ‘hybrid.’ If you’re making a value-based (e.g. economic) decision, the Volt is outta there. You need a lot of emotion (or cash laying around) to overcome a 138% ‘hybrid surcharge.’
Value-based decisions are made on an ‘all-in’ price.
To be profitable, companies must compete in each of the 4Ps. Whether they want to or not, no matter how hard they may try to obfuscate, they have no choice!
This is where I have a problem with surcharges. By breaking out some segment of fuel charges as a separate expense, companies are trying to obfuscate or confuse the Price component.
It doesn’t work!
Traveling by air has been a great example. You’re quoted a price, and then there’s the raft of ‘extra’s, including a fuel surcharge. Consumers, individual or business, always drop straight to the bottom line. What’s the total expense going to be?
Using a fuel surcharge is an excuse for being uncompetitive (or lazy, same thing). See! My tickets are competitive (after I deduct the $50 fuel ‘surcharge’)!
Using a fuel surcharge is a scape goat’s way of getting around having to update your pricing frequently (e.g. lazy) or clearly stating how competitive you are in the current environment.
Companies: Be Innovative Leaders. State your case. State it clearly. Define your value. And stop hiding behind fuel surcharges.
Because, remember: We see you. You’re not fooling anybody. And, we all own plungers.